A trademark is a word, name, symbol which is associated with some goods and services. The purpose of providing symbol of trademark is to distinguish the product of one industry from another. A trademark not only gives the owner exclusive right to use mark but allows the owner to prevent the other to use the similar mark which may lead to a confusion among the general public. A trademark in India is governed by Trademark Act, 1999 and Trademark Rules, 2017.
A trade mark agreement is an agreement where the trademark owner i.e. (licensor) grants permission to another party i.e. (licensee) to use its trademark, according to its mutually agreed terms and conditions. This transfer of right can be of many types:
- Exclusive or non-exclusive
- Limited or unlimited time
These licenses are granted on the payment of certain sum of money which is known as royalties.
ADVANTAGES OF TRADEMARK AGREEMENT:
- One of the advantages to the owner of trademark is that he can have potentially continuous generation of income without doing anything. In other words, licensee does all work in order to incur profit and on every profit, the licensor is paid certain sum of money without losing any ownership rights.
- The owner of trademark has statutory protection under law, in case of any dispute; legal right would easily be established through the agreement.
- The trademark agreement is formed on mutually agreed terms and conditions; therefore, both the licensor and licensee are bound under the legal obligation.
- Granting of license will all lead to the expansion of business in territory.
- Licensing is a strategic partnership through which both the licensor and licensee will be in a ‘win-win’ situation.
- Providing license will not only help licensor to earn good revenue but will also have greater recognition in the market.
Characteristics of Agreement:
- This agreement clearly results in legal obligation of one party, where the licensor permit the licensee to use its trademark and in return the licensee is obliged to pay for the same.
- It is a bilateral agreement; which means an agreement where two parties are involved, according to Indian Contract act there must be two parties involved for a valid agreement.
- It is a formal agreement, in which the licensor and licensee mutually agrees to the condition set forth in the agreement.
Minimum Requirements:
- Licensor`s Representation: Licensor must furnish the following in an agreement:
- Ownership of Marks: the licensor must show he is the sole owner of the mark.
- Right to license: licensor has granted license to licensee and the licensee has right to use the registered trademark.
- No infringement of third parties right: the use of registered mark in territory will not infringe the intellectual property right of any person.
- Licensee`s Acknowledgement: Licensee must furnish the following in the agreement:
- Right to use mark: the licensee’s right to use mark has solely been derived from the agreement.
- Benefit of Goodwill: if licensee’s usage of mark result in benefit of goodwill that will solely be licensor’s benefit.
- Limited grant of rights: the does not acquire any interest other than mentioned in agreement. All rights not expressly granted to licensee are reserved for licensor.
- Compliance with law: The licensee must comply with all laws and industry regulations relation to manufacture, sale, distribution of licensed goods and services.
- Quality control: The licensee must ensure that the quality of services it provides under licensed mark or the good sold under licensed mark are in confirmation with licensor’s standard.
- Evidence of use in territory: The licensee on the request of licensor shall provide declaration or document that licensor consider necessary as evidence for the use of mark in territory.
- Confidentiality obligation: Licensee is under obligation to protect the confidential information of the licensor, which would be detrimental to the interest of the licensor.
- Payment obligation: There are two payment obligation that is to be paid by licensee:
- License fee: The licensee shall pay annual fee payable annually on every effective date.
- Royalties: The licensee along with license fee shall also pay the royalty (royalty rate percentage on net sales of licensed product) which payable within 30days of end of each quarter.
- Termination: This clause defines the modes of termination:
- An agreement can be terminated upon issuing notice to the other party.
- Licensor may terminate the agreement if the licensee fails to comply with his duty.
- If there is any material breach of obligation.
- Third party infringement: If licensee come across that third party is trying to infringe, he must bring to the knowledge of licensor, enable him to take necessary legal action and in such event the licensee will cooperate with licensor and will also borne cost wit licensee.
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